The European Union is waiting for India’s response to its proposal of an ‘investment court system’ as a forum for trade arbitration, a move which could give an impetus to the negotiations for the India-EU Free Trade Agreement (FTA) and the Bilateral Investment Treaty (BIT).
Speaking to a select group of journalists on Saturday, the EU’s Executive Vice President and Commissioner for Trade Valdis Dombrovskis said that the EU remains the single largest trading market in the world despite a growing number of risk factors such as the war in Ukraine. He remarked that Russian oil flowing into the EU zone through Indian oil majors may neutralise western sanctions against Moscow.
Trade arbitration forum
“The Investment Court System basically deals with global disputes and will be dedicated to investment protection. We have included this in recent agreements like with Vietnam and Canada. We are currently waiting for India’s counter proposal and we expect to discuss this in the next round of our negotiation,” said Mr Dombrovskis.
The senior official did not explain what would be the composition of the Investment Court System but it is understood that such a mechanism has to be permanent and would consist of a court followed by an appeals tribunal. Such a mechanism is expected to work on the basis of transparency and would be led by highly regarded judges.
Mr. Dombrovskis participated in the G-20 meeting of trade and investment ministers in Jaipur this week and co-chaired the EU-India High Level Dialogue on Trade and Investment with Commerce and Industry Minister Piyush Goyal. He also met with Finance Minister Nirmala Sitharaman on Saturday.
Neutralising sanctions
Mr. Dombrovskis expressed his confidence that despite the lingering impact of the Ukraine war and disruptive tendencies, there was a lot of interest worldwide in accessing the EU market. He dismissed any concerns that a growing number of risk factors would cast a shadow on the region’s future prospects. “The EU remains the world’s largest trading market. We still see a lot of interest in accessing a single market that we have to offer. The war in Ukraine has triggered a more intense search for reliable partners around the world,” said Mr. Dombrovskis.
As part of the measures taken to safeguard the EU’s market from the effects of the Ukraine war, the EU has been reducing “strategic dependency” on Russian fuel, he said. However, he expressed concern about the “rapid increase” in the import of refined oil products into the EU from India, and indicated that western sanctions against Russia would end up being neutralised if Russian energy reaches Europe through the Indian oil majors.
“What we see now is a rapid increase of refined oil products, so to say, imports into the EU from India. But if they are made with Russian oil, in a sense it defies the purpose which we are putting in front of us as the EU, to reduce Russia’s ability to wage the war. So this is something which will provide some reflection on that,” the EU Trade Commissioner said.
India-EU FTA is a priority
The ending of past trade engagements with Russia has prompted the EU to look for new partners around the world. Mr. Dombrovskis said that the EU’s negotiations with India on the FTA and the BIT had made progress despite being protracted. He pointed to the EU-India Trade and Technology Council meeting held in May this year as a move in a positive direction, showing that the EU considers the talks important. “The only other Trade and Technology Council the EU [participates in] is with the United States,” he noted, adding that Indian and EU officials were in talks regarding “deep and comprehensive market access [and] public procurement”, among other things.
Expectations that the India-EU FTA will be fast-tracked have been growing, especially as India concluded trade pacts with the United Arab Emirates and Australia in 2022. The Comprehensive Economic Partnership Agreement between India and the UAE and the India-Australia Economic Cooperation and Trade Agreement (ECTA) have added to India’s post-pandemic recovery plans and heightened expectations for the deal with the EU.
‘No major hurdles’
However, a high-level EU source said they were aware that the India-EU FTA could not be compared to the other agreements that India has concluded in recent months. “The EU is a big market and an FTA with it is like a prize and cannot be compared to India-Australia agreement,” said a source privy to the negotiations between the two sides, adding that there were no major hurdles in the FTA talks.
In recent trade negotiations, India has shown interest in ensuring that Indian professionals also have access to foreign clients and markets. Mr. Dombrovskis claimed that “broader travel issues” were not being covered under the FTA negotiation.
